Mirae Asset Securities Co., Ltd. (A006800) Earnings Call Transcript & Summary

Good morning. Thank you for participating in Mirae Asset Securities Earnings Conference Call. Today, after presentation on the business results, we will proceed to a Q&A session. [Operator Instructions] So now begin the 2025 Q2 earnings presentation of Mirae Asset Securities.

Good morning. I am Dong-Jun Shin, Head of the ESG and IR team at Mirae Asset Securities. Thank you very much for participating in our 2025 Q2 earnings call. Joining us today are Sun Ho Heo, CEO of Mirae Asset Securities; and [indiscernible] Head of Business Innovation Division. And for our international investors, simultaneous interpretation in English is being provided. Today's conference call will proceed in the following order: an update on the progress and plans for Mirae Asset Securities 2025 key strategies, a review of the Q2 business performance and results by business segment followed by a Q&A session. The presentation materials for the 2025 were Q2 earnings are available on our company's corporate website at ci.securities.miraeasset.com under the regular reports' menu. A recording and transcript of today's call will also be posted on the website. Please note that today's presentation contains forward-looking statements are based on information available as of the time of preparation. Actual business results may differ due to changes in business environment or strategy. Now we will begin with the remarks from our CEO. Please refer to Page 2 of the earnings presentation materials.

Good morning. This is Sun Ho Heo, CEO of Mirae Asset Securities. Thank you very much for attending Mirae Asset Securities 2025 Q2 Earnings Presentation. In the second quarter, our consolidated profit before tax was KRW 520.2 billion, and net income was KRW 405.9 billion, up 50% and 57%, respectively, compared to the previous quarter. For the first half of the year, consolidated profit before tax was KRW 856.3 billion (sic) [ KRW 866.3 billion ], and net income was KRW 664.1 billion, representing increases of 71% and 80%, respectively, compared to the same period last year. As of the end of the second quarter, consolidated shareholders' equity stood at KRW 12.4 trillion, up approximately KRW 155.3 billion from the previous quarter. Based on the first half performance, the annualized ROE was 10.9%. Today, I will focus my remarks on 4 major themes that centered around WM and pension and global business, digital and AI and enhancing shareholder value. First, let me begin with our wealth management and pension businesses. At Mirae Asset Securities, we operate under a client-first philosophy, always giving top priority to our clients' investment returns. Leveraging the industry's largest overseas network and strong group synergies, we have consistently provided attractive investment opportunities. As a result, global client assets, including those of our overseas subsidiaries have grown to KRW 533 trillion, an all-time high and an increase of KRW 50 trillion compared to the end of last year. We are strengthening our private WM services targeting high-net-worth individuals. To provide a one-stop solution encompassing individuals, corporations and family offices, we have established a dedicated team and opened a new ultra-high net worth specialized brand, the stage family office. The individual investment government bonds, which we were selected to distribute exclusively in February last year, have recorded sales of approximately KRW 1.4 trillion as of the first half of this year. These bonds have established themselves as a unique and stable long-term high-quality investment products for our high net worth clients. As of the end of Q2 2025, the assets of individual high net worth clients with more than KRW 1 billion have increased by 16% compared to the end of last year. We're also leading the market in terms of global asset allocation. As of the first half of this year, our overseas stock holdings posted KRW 39,600 trillion, the largest among all financial companies. Through our overseas network, client-facing investment strategy teams as well as research center, we are actively managing portfolios to preserve returns despite market volatility. In the pension business as well, we remained overwhelming #1 in the securities industry based on assets under management. For performance-based retirement pensions, DC and IRP, we have risen to a third place among all 41 providers, including banks and insurance companies. Furthermore, we are expanding a new WM model that integrates data-driven digital wealth management and PB services. To that end, we are launching a WM studio organization in the second half of this year, and we plan to significantly increase our team of digital PBs, which currently consists of around 50. Second, our global business. In the first half of this year, our overseas subsidiaries posted a profit before tax of KRW 224.2 billion. This already exceeds the total annual performance of last year by KRW 58.1 billion. The annualized ROE of our overseas entities also improved significantly, 8%. Over the past few years, we have been expanding our ETF business, focusing on the U.S., Hong Kong and Europe. We extended the know-how of JCO platform in London to Hong Kong and in the United States. We established GTS, a market-making firm specializing in ETFs. As a result, revenue related to ETFs more than doubled in the first half of this year compared to the same period last year. In India, net operating revenue has grown more than threefold, Sharekhan, which we acquired last year, is currently incurring increased costs due to IT and digital investments but is pursuing a growth strategy focusing on a shift towards WM-centered structure over the mid- to long term. Our U.S. subsidiary is achieving its highest ever performance since establishment. We are the only domestic financial institution operating U.S. equity brokerage platform directly linked with its head office. Securities borrowing and lending and clearing and settlement services have become its core sources of revenue. The Hong Kong subsidiary is growing rapidly through the establishment of a new business platform and is expected to serve as a forward base for our China operations moving forward. The innovation and growth of our global business is only just beginning. We aim to read and respond to the structural changes in the global financial industry and actively develop our WM business in key growth markets such as U.S., Hong Kong and Singapore. At the same time, we will continue to explore investments in innovative tech companies in high potential markets like the U.S., China and India. Thirdly, we are strengthening our competitiveness in digital assets and AI. We are proactively preparing for the era of digital assets and tokenization. We're building an integrated system that can implement everything from asset issuance to investment clearing and settlement on the blockchain. At the end of last year, we have completed the first phase SEO platform. And in the first half of this year, we have expanded it into a dedicated division and added specialized professionals. Once the digital asset regulatory framework is introduced, we plan to offer an all-in-one service that enables clients to manage both traditional and digital assets on a single platform. We're also actively adopting AI solutions. For our clients, we provide real-time summarized investment information and recommendations for both domestic and overseas markets. For our branch-based and digital PB, we support personalized wealth management consulting through our AI wealth management assistant tool, which takes into account each client's specific asset events and needs. Assets under robo adviser management now totaled KRW 3.3 trillion, an increase of KRW 1.2 trillion over the past year. Internally, we're expanding our use of AI assistant and agents to enhance employee productivity. By strengthening our digital asset and AI capabilities, we aim to firmly establish a foundation for future growth. To improve our digital asset, AI and IT capabilities, it is essential to attract and retain top-tier tech talent. We are preparing exceptional compensation plans, including stock options to actively secure the best professionals in the industry. Finally, enhancing shareholder value. Korean securities stocks have long been undervalued. In response, we have steadily implemented shareholder return policies in 3-year cycles. In June of this year, we disclosed the progress on the corporate value plan that we originally announced in August 2024. Since 2021, we have returned a total of KRW 1.1 trillion to shareholders through dividends and share cancellations. In addition, our parent company, Mirae Asset Capital, completed open market share buyback worth KRW 100 billion between May and July. We plan to carry out additional share buybacks and cancellations based on our shareholder return policy during the second half of the year. Going forward, we will review our treasury share policy in accordance with the relevant legal amendments. That concludes our presentation of the progress of the key strategies and future plans of Mirae Asset Securities for the first half of 2025. I will now pass the floor to CFO, [indiscernible] be to discuss the detailed results by business segment for the second quarter. Thank you.

Good morning. I am [indiscernible], Head of Business Innovation Division. I would like to refer to Page 3 of the earnings release, beginning with the 2025 Q2 business performance. It amounted to -- our annualized ROE amounted to 10.9% and growth in PI income drove a trading income to an all-time high of KRW 476.2 billion. And overseas subsidiaries saw growth in recurring income Q-o-Q as well as higher valuation for investment assets reflected, resulting in 2 consecutive quarters of more than KRW 100 billion, specifically KRW 106.1 billion in pretax income. As for investment assets, as in the previous quarter, valuation gains and investment provisions in innovative companies drove net profit of around KRW 126 billion. Page 4 is the financial summary, so please refer to it later for details. Next, detailed business performance by business segment. First, brokerage performance on Page 5 of the earnings release. Brokerage fee revenue was up 9% Q-o-Q at KRW 216.3 billion. The average daily domestic trading volume was up 27% Q-o-Q, recording KRW 23.6 trillion, and domestic stock brokerage fee revenue was up 23% Q-o-Q at KRW 119.3 billion. Overseas stock brokerage fee revenue was down 5% Q-o-Q at KRW 96.5 billion. In Q2, overseas stock trading volume had gone up, but due to an increase in trading volume from new clients receiving a 3-month commission fee offer as well as from certain clients receiving negotiated commission arrangements, the average commission rate declined. Overseas stock balance, thanks to the rise in the U.S. stock market, increased 15% Q-o-Q to KRW 39.6 trillion. Next is Wealth Management, WM on Page 6 of the earnings release. Financial product sales revenue due to the base effect of wrap product revenue growth and record high performance in Q1 went down 4% in Q2 to KRW 75.7 billion. WM assets were up 3% Q-o-Q at KRW 197.4 trillion and total client assets, including brokerage assets were up 12% Q-o-Q at KRW 453.4 trillion, hitting a record high. With the pension transfer arrangements, Mirae Asset's long-standing emphasis on long-term installment investment and global asset allocation is bearing fruit as the money move towards Mirae Asset pensions is overwhelmingly strong. Pension reserve was up 6% Q-o-Q at KRW 47.3 trillion, another record high. In Q2, the retirement pension reserve was KRW 32.1 trillion, which was not only for this quarter, but for the whole of H1, the highest growth in reserve among the 42 retirement pension providers. Particularly for performance-based retirement programs such as DC and IRP reserves placed us at third place across the entire financial market, including banks and insurers. In Q2, the reserve growth for performance-based retirement programs was KRW 26.3 trillion, the highest among retirement pension providers at 17%. Next, on Page 7 of the earnings release, trading performance. Our trading income includes stocks, fixed income, derivatives and other traditional trading and also S&T and PI income as well. Through distribution and dividend income, though distribution and dividend income was down 27% Q-o-Q, the overall trading income was up 46% Q-o-Q, hitting a record high at KRW 476.2 billion. In Q2, growing income from principal investment, solid flow trading and fixed income profits drove strong performance. If you look at the breakdown of the operating income, PI was 40% and non-PI was 60%. As of the end of Q2, our fixed income balance is up 2% Q-o-Q at KRW 37 trillion. Continued market volatility compels us to focus on risk management in terms of strategy in H2 as well. One of our major revenue sources, flow trading business is also generating solid income and revenue. Thanks to the rally in Korea and global stock markets, multi-asset strategies, ETF LP, securities, borrowing and lending all showed strong performance. As for principal investment, cooperating with overseas subsidiaries and participating in Hong Kong IPO cornerstone investment and overseas block deals helped us diversify our revenue sources in the international market. Next, consolidated investment asset portfolio performance. As of Q2 end, consolidated investment asset valuation amounted to KRW 9.9 trillion. In Q2, overseas real estate-related losses continued to decrease. And the fair valuation of our innovative business investment asset went up around KRW 200 billion, resulting in investment asset portfolio performance of around KRW 130 billion in income, continuing with the surplus trend. Next, please refer to Page 8 of the earnings release for performance in investment banking. In Q2, investment banking fee revenue was up 45% Q-o-Q at KRW 49.6 billion. Particularly, there was a remarkable underwriting and PF advisory fee revenue as we participated in SsangYong C&E acquisition financing and SK discovery PRS among other major deals in the market. Also from our existing real estate PS assets, refinancing and securitization revenue was generated. Up to now managing risks in the real estate PS market and keeping in line with financial authorities' policies, real estate financing was an area where we were cautious leading to relatively weak performance. In H2, we plan to more actively participate in main project financing mandates for high-quality development projects in the Seoul Metropolitan area to improve our revenue. With regards to IPO, we led 2 deals in Q2, a total of 10 deals in H1, placing us at the top of the IPO league as of midyear. In H2, important deals such as the hospitality business, Sono International and global children's content company, the Pinkfong Company are in the pipeline, and we expect to uphold this favorable momentum. In the earnings release, corporate loan revenue is classified as interest revenue and due to a decrease in balance, it was down 2% Q-o-Q, recording KRW 23.2 billion. Next is our overseas subsidiaries performance. Please refer to Page 9 of the earnings release. Overseas subsidiaries pretax income reached KRW 100 billion for 2 consecutive quarters for the first time. In Q2, the pretax income was KRW 106.1 billion, meaning that in H1, 26% of Mirae Asset's total consolidated pretax income came from overseas. As was the case in Q1, in this quarter, we posted robust recurring income and investment asset valuation gains in innovative businesses were reflected in our performance. In particular, in developed markets such as the U.S., Hong Kong and Europe, for the past few years, our efforts to diversify business focusing on ETF are now bearing fruit, translating to income from the developed markets amounting to 63%. As for sales breakdown by business, Wealth Management, including Brokerage, was 33%. Trading and PI was 52% of revenue and Investment Banking took up 2%. Others amounted to 13%. As is the case with Domestic business, we have quite a diversified breakdown of performance. Mirae Asset Securities is the only Korean financial institution that provides its own platform through the dual subsidiary for U.S. stock brokerage services offering reliable client service. Also recently, we have established a global ETF market making company in the U.S., and we are preparing to expand our flow trading business as well. In addition to the SPL and repo business, we have been focusing on, and we are seeing results from the clearing business, which will likely play a focal role in ETF-related business. Last year, the acquisition of Sharekhan in India was completed, and the post-merger integration PMI is now underway. From its previous focus on brokerage business, we are going to expand into asset management as well. AI chatbot and new summary services already provided in Korea are also going to be introduced in emerging markets such as Indonesia and Vietnam as part of the enhancement effort for the mobile trading platform, enabling differentiated services to step up our competitiveness in the overseas market. In addition, more robust governance and risk management systems are being built so we can reinforce our internal controls. That brings us to the end of Mirae Asset Securities 2025 Q2 Business Results Earnings Call. Now we would like to begin the Q&A.

[Operator Instructions]

I do have a question about digital assets. So in June, there was a digital asset base. And now we also have stablecoin-related bills that have been tabled. So I do know that there is a dedicated organization related to digital assets relating to stablecoins and tokenized securities. What is your policy in response strategy? I have another question. It's related to your Indian business. So we have acquired the Sharekhan business, not only brokerage for WM and/or IB. So encompass all of the business segments this year was KRW 30 billion, in 2030 up until KRW 318 billion is your target. So can you please provide an outlook on this?

I am [indiscernible]. You have asked 2 questions. First was a question on digital assets. So let me take up that first question. Yes, the bill has been introduced in the case of our stablecoin and digital assets and also spot ETF, regarding these assets, the regulatory framework or direction has not been finalized. And so we're not in a position to give you a finalized response about our strategic direction. In the case of tokenized securities or stablecoin or virtual assets spot ETF, when these regulatory frameworks are introduced, we do believe they will present a big opportunity business-wise, and we are proactively prepared for this kind of environmental changes. And so when the guidelines from the SSS was introduced about tokenized securities in 2022. We were the first among the securities company to establish our exchange infrastructure in this area. And we are advancing this infrastructure. And with regards to the virtual asset, spot ETF on -- we have overseas entities, Global or JCO. So these subsidiaries do have well built-up experience in terms of issuance of IP-related work in know-how. So when the regulatory green light comes out about the issuance, we are able to collaborate with these overseas subsidiaries. So we're in a better position than any other company to prepare and enter into this area. We do believe that the most meaningful change related to digital assets is where most of the assets become tokenized. And this change will actually determine the very survival of existing securities companies and also presents a big window of opportunity. Therefore, as has been noted by our CEO, we are fully prepared to respond to such changes. Next, your question was about the developments in the Indian stock market and also the outlook for our Mirae Asset Sharekhan. So with regards to the market situation in India, recently, tariff-related 50%, I think, imposition tariff has been announced. But what is impacting the securities market is the Indian Securities and Exchange Board in January of this year has introduced tighter regulations on the futures and options market. And because of that repercussion now there has been a decline in derivative trading, and this is having a negative impact on the revenue of security company that is focused on brokerage business. So such supervisory measures do have a positive impact in terms of market stability. But because of regulatory issues, this is also seen as undermining the vitality of the market. So reflecting these developments, I understand that the authorities are discussing potential easing measures for the market. So the outlook for the Indian stock market is that we do believe stable growth will be maintained. It has a very strong domestic industry and also the performance of the company is quite fair. And so we do have a positive outlook for Sharekhan for the stock market actually. And in the case of Mirae Asset Sharekhan after the acquisition has been completed, we're now going through the PMI process and IT, and digital investment is ongoing. And so there is cost issues. So there isn't any outstanding performance to be disclosed. But in the past, this company has been focusing on an offline brokerage business, but now they're shifting to a comprehensive securities company encompassing asset management, Wealth Management, IB included. And so we do believe they will make significant contributions to the profit of our overseas subsidiaries.

We would like to take the next question.

I have one question. When Mirae Asset was merging with Daewoo Securities, I believe that you have come across some treasury stocks, and there has also been some changes in the legal regulations. What are your plans on how to use the treasury stocks that were obtained in the merger?

So regarding our plans on the treasury stocks, as you just mentioned, when we were merging with Daewoo Securities, we have come across around 110 million treasury stocks. And as I said in the previous earnings call, this will relate to reduction of shareholders' equity and capital. And it also requires a special resolution at the general shareholders' meeting. So it differs from canceling treasury shares acquired within the scope of distributable profits. And we have to look at the progress of the ongoing amendment to the Commercial Act, and we are going to come up with a plan for the treasury stock, which is the most favorable for our investors and shareholders. That...

With this, we will conclude the earnings presentation of Mirae Asset Securities 2025 Q2 earnings presentation. If you have any further questions, please post your questions to the ESG IR team of Mirae Asset Securities. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]